We recently published a list of 10 Small-Cap Stocks Jim Cramer is Talking About Amid Latest Market Rotation. Since Installed Building Products Inc (NYSE:IBP) ranks 8th on the list, it deserves a deeper look.
Earlier this month Jim Cramer talked about the rally in the small-cap-heavy Russell 2000 Index, saying these kinds of rebounds show you have to “stay invested” in the market to make “big money.”
“When I say stay in I mean you have to be as invested as you possibly can be so you don’t miss monster moves.”
Cramer said the Russell 2000 index rally was led by several “oddball” stocks that many people aren’t aware of.
“The biggest winners in the Russell today are all the companies I either don’t know or I barely heard of. You know I know thousands of stocks!”
Cramer highlighted that almost half of the stocks rising in the Russell 2000 index were biotech or healthcare companies that are losing money. Cramer believes these companies might be worth something only “years from now” and called them “risky” stocks.
Jim Cramer talked about what he called “small- and medium-sized businesses” which he believes can benefit from two possible developments in the near term: a Trump win in the election and rate cuts. A Donald Trump presidency, according to Cramer, could provide a level-playing field for these small companies which often get left behind by major companies amid tough regulation. Since Trump is expected to decrease regulations if he comes to power, these small companies could thrive in this new environment. Cramer said that money is coming from the “sidelines” as investors begin to invest in stocks instead of hoarding cash to earn interest income.
Cramer has been talking about several small-cap stocks in his programs lately. In a recent program, he mentioned several small-cap stocks that were moving recently and briefly discussed their businesses. We picked these stocks and analyzed their fundamentals and growth potential. We also mentioned hedge fund sentiment around these stocks. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Installed Building Products Inc (NYSE:IBP)
Number of Hedge Fund Investors: 22
Installed Building Products Inc (NYSE:IBP) provides waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving solutions. Cramer mentioned that the stock trades about 21 times earnings.
“I still like it.”
Installed Building Products Inc (NYSE:IBP) which also pays a dividend, has grown its revenue at 17% per year on average against a 38% compounding growth in earnings from 2019 through 2023. Some secular growth catalysts for the stock include possible rate cuts which could spark a new activity cycle in the construction industry. The U.S. residential construction market is expected to grow at a 3% annual rate through 2029. The company saw a whopping 27% year-on-year increase in single-family starts in Q1 2024, driven by low existing home inventory.
Installed Building Products Inc (NYSE:IBP) has been able to post strong operating margins when compared with peers. It has a gross profit margin of 26.3% and on average it generated $1.73 in revenue per $1 of capital. This efficiency has become the company’s advantage.
Barclays recently published a list of small-cap stocks with quality and growth characteristics amid the latest market rotation. Installed Building Products Inc (NYSE:IBP) is part of the list.
Baron Real Estate Fund stated the following regarding Installed Building Products, Inc. (NYSE:IBP) in its first quarter 2024 investor letter:
“For example, the shares of Installed Building Products, Inc. (NYSE:IBP), one of the nation’s largest installers of insulation and complementary building products, appreciated by 45.0% during the recent quarter, in part owing to signs that industry conditions in the new single-family residential construction market continue to improve (new single-family residential construction drives approximately 60% of IBP’s revenues).
In addition, IBP is executing superbly across various strategic initiatives to drive growth from other construction end-markets (new multi-family construction, light and heavy commercial construction, remodel construction), improve pricing and profitability, and identify attractive tuck-in acquisition targets…
Overall, Installed Building Products Inc (NYSE:IBP) ranks 8th on Insider Monkey’s list titled 10 Small-Cap Stocks Jim Cramer is Talking About Amid Latest Market Rotation. While we acknowledge the potential of Installed Building Products Inc (NYSE:IBP), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IBP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.